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Catching Up

December is a month of Advent – preparing, catching up, and waiting.  There has been a lot of economic and political news lately, most of it not incredibly bad.  Some has even been good.  Let’s celebrate the season and the thin coating of snow on the ground by catching up with the unfolding stories.

The jobs picture does continue to improve, with an official 120k jobs added in November alone.  This is not a huge gain over October but it shows that the momentum is continuing, as noted before.  This came despite a stubbornly high Unemployment Initial Claims number, which has not fallen much below 400k per week.  Big companies and government appear to be shedding jobs, but others are being created.  Where are these new jobs?  No one has been specific about the growing areas of the economy, which probably means that it is not obvious and no one knows yet.

The high rate of churn is a strong sign that restructuring is occurring and the next economy is finally being formed around us.  When that is identified there will be a lot more investment in whatever is growing and a chance for real optimism to bloom.  Give it about six months before it hits the popular press and really takes off.

Headline unemployment dropped even more, but this number is utterly useless.  A lot of those gains were from “discouraged workers” falling off their official count because they’ve been out of work for over a year.  As always, just ignore that number.  What matters is this:  the pace of job gains has to increase before a real dent is made in unemployment, but there is a foundation for future growth – as long as nothing screws it up.

The improving economy may have some relief for state and local governments built into it, too.  The growth in jobs came despite layoffs of 20k in government, a figure that shows how pinched states have been.  But Minnesota’s budget projection came in with a surprise $876M surplus, achieved by a combination of higher revenues, lower unemployment costs, and shuffling off some of the health care tab to the Feds.   If state governments at least hold even for the next year and stop layoffs there will be more jobs yet.  There is a feeling that we have indeed bottomed out.

At the Federal level, however, there is silence.  The Super Committee failed to do anything at all, which was supposed to trigger automatic cuts to everything.  Well, maybe.  There was some talk of not going through this “sequestration” before everyone fell completely silent.  No news is good news?  Hardly. There is still a crisis, explained about as succinctly as I’ve ever seen by New Hampshire Democrat Mark Fernald (who ran for Governor in 2002).  But Congress itself has decided to lay low, perhaps awaiting a big present from Santa.

That’s not to say that everyone at the top has been silently waiting.  The Federal Reserve lowered its rate to a number of banks around the world, really targeting Europeans without making it too open.  Nearly everyone can borrow from us at rates very close to zero, taking pressure off the European Central Bank (ECB) to lower its rates. There is even talk of another Quantitative Easing round for the first time since this summer, when the idea was roundly criticized in the financial world.

The International Monetary Fund also stepped up with more cash at the same time as the Fed action.  The result is that Europe has, once again, bought itself some time and German Chancellor Angela Merkel will use that time to come up with a new structure that allows the ECB to do what it has to do without sticking taxpayers with the bag.  That’s the plan, at least.

In Europe, the lack of an immediate crisis is close enough to good news, right?

Through it all, there is positive momentum.  Much of what was necessary to achieve an economic restructuring is in place, although at the highest levels the politicians have an awful lot more dickering to do.  Is the increased attention in Europe a sign that they will finally craft a solution to their problems?  Is the decreased noise in the US a sign that Congress is about to get serious?  We will see, with time.  But the start of December has been pretty good so far.

What do you think?  Are there some other big news stories that you’d like to talk about?  Let’s make this something of an open thread and chat for a bit.

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15 thoughts on “Catching Up

  1. Hmmm…As I try (in vain) to digest this my mind goes to “personal economics” and wonder how many of the employed understand they are, perhaps one job, or even an hours cutback, away from disaster, and are taking the steps necessary to make the hit of a lost job less of a disaster: cutting out unnecessary expenditures, paying off term debts, not purchasing that shiny new car, or even eating out less.
    Especially now during the mad gift-buying season, how many are willing to not use that credit card, or maybe purchasing less expensive gifts? [Sigh]

    • Yes, optimism has to be tempered by the harsh reality. I guess what I’m trying to say is that we have definitely seen the bottom and we’re in the process of building the foundation for a genuine recovery. I know that the popular press has a tendency to talk about “recovery” as if it’s an event that just happens, but after a credit-bust Depression like we’ve been in there is always a restructuring. That takes a lot more time and effort, and our leadership at the top has been pathetic at best (leadership in politics, business, academics, the whole shebang). I see us turning a corner, but there is definitely a long way to go.

  2. I would not count on the restructuring just yet. The financial industry is still in bad shape, especially Bank of America. I don’t care how much we bail them out, they have to do business differently then they do now. I don’t think they care much about small businesses either. So until that is fixed I don’t know how all the money supposedly on deposit at the Federal Reserve is going to help anyone.

    • That is a good point – we have to restructure the part of the economy that did the most to create the Depression in the first place. That would take a lot more political will than we have – or a real meltdown, possibly both. The cash is there and we can always print more, but getting it out to the right places is going to be tricky. Identifying growth opportunities will help, which I do think will start happening soon, but if they can’t/won’t deliver the capital needed you’re right.
      Can we develop a plan here? What do you think needs to be done to reform finance? I’ve had a few ideas but it’s not really a plan yet.

  3. Some of this is in the “I’ll believe it when I see it” category, but the state budget surplus is at least one good surprise. I agree with Annalise that until we get the big banks to actually have to work in the community again nothing good will happen.
    Here’s a question: if the ‘headline’ unemployment rate is meaningless why is it used so much?

    • Fair enough – when it really turns around we can all be a lot happier. Especially when there is upward pressure on wages, as Jack noted earlier. But I think that’s just over the horizon now – as long as nothing screws it up.
      Why is the headline unemployment rate used so much? I think this is one of those annoying things in our world that would just go away if everyone stopped paying attention to it. Something like the Kardashians.

  4. the corruption is the main problem I dont care how much money they print – as long as it goes to the oligarchies the rest of us will be left in the cold

    • You are right, that is the problem. The money has to get out in the economy, and so far we haven’t even come close to making that happen. Keep in mind that in the last Depression it was the government that was getting money out, not the Fed. They’re better at it, I think.

  5. Did you see Jon Stewart picked up on the big loans from the Fed last night? You beat him by about 3 days but his was a lot funnier. 🙂
    If things have leveled out it is a good time to look at where we are going and make some serious decisions. I agree that getting some control over banks is mandatory especially if they are counting on us to bail them out. That is the price of insurance guys.

    • Hadn’t seen that, thanks. I think it’s time for me to get together my financial regulation plan. It does start with Glass-Steagall II (The Wrath from Cons) and goes out from there.

  6. My spiel is that the depression is housing led. So the measure for recovery for me is when the number of households with negative equity is reduced. Reduced by how much? I’ll leave that to the academics.
    We need housing and housing finance reform first. Americans have been consuming too much house; the average square foot of new homes has increased since the end of WW II. Does anyone remember McMansions? I favor housing regulation at the local level. We need more multi family homes; We need to take away the shame of not owing a home. That’swhy I think trying to encourage people to buy less on Black Friday is really mistaken. People really spend their money on housing, cars, weddings and vacations.
    That’s what we need to tax and regulate. The 30 year mortgage is really a mistaken financial instrument. We need mortgage lengths that really reflect how long people will live in a house. 10 years mortgages or 15 year mortgages. Does this mean fewer will own homes. So be it. I think Americans are greedy in the trading up of houses. But being upwardly mobile is so ingrained in our culture that that is the norm. During the housing boom and even the 1990s people were essentially surfing homes. These types of high expectations have been around since the terms “yuppies” and “gentrification” were coined. So financial regulation? Yes, so that old era of too much housing finance is a distant memory.

    • We don’t really disagree here, but the difference in emphasis makes our arguments pretty starkly opposed. There is a trend that my 78 year old Dad calls “The General Inflation of Everything” which describes how everything has gotten so much more during his life. Housing is a big part of that, for sure.
      To me, it’s always a matter of balance. I live in a big house, I really do, but it’s 150 years old and I restored it myself. I’m a bit loathe to say that others can’t have what I do. It would be hypocritical.
      However, we obviously cannot keep making everything bigger over time – there has to be a limit. And I also agree on the 30 year mortgage, which seems very arcane.
      As for the “No shopping”, the cute li’l poem I wrote was very careful to not demonize retailers per se. I want to see a sense of balance restored to our lives – one that includes time for families, contemplation, spirituality, and so on. Does that mean no shopping at all? No, not at all – but we’re so far out of whack on this score that it’s hard to not take a hard line versus what we have today. Perhaps I overdid it on the Monday previous, but youknowwhatImean.
      I am a city person. I like multiple family homes or at least houses stitched tightly together in a fabric that includes a strong community. Part of that is the business strip within walking distance and access to transit that whisks people off to bigger opportunities. There are so many ways this life has been devalued over the last 60-some years that it’s hard to know where to start. But it is a good life – rich, exciting, and full of support when things get bad.
      I haven’t written about cities as a concept in a long time, but I think I’ll return to that in a bit. It’s time. Thanks for your patience with my neo-Amish tendencies, tho – your arguments make mine better over time. 🙂

  7. I do feel that there has been some good news lately. I count the lack of anything out of Congress as good news because at least the Bush tax cuts will expire. I do not know about Europe but the stock market rallied on the news so thats something. It may be too early to be optimistic but perhaps we should keep our fingers crossed.

    • I don’t know if the stock market is worth paying attention to (they tend to think pretty short term!) but I agree that it’s worth keeping our fingers crossed.
      Just noticed that in a lot of news articles on economic and business topics that the term “Recovery” is strangely missing these days. We’re no longer waiting for it, I guess. The term “Restructuring” has yet to make it to the popular press, however. We’ll see. 🙂

  8. Pingback: Imagination | Barataria – The work of Erik Hare

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